Sazerac Brands, LLC v. Allocated Liquor LLC

O [7] 8 United States District Court 9 Central District of California [10] 11 SAZERAC BRANDS, LLC, Case № 2:22-cv-08467-ODW (SKx) 12 Plaintiff, ORDER GRANTING PLAINTIFF’S 13 v. MOTION FOR DEFAULT 14 ALLOCATED LIQUOR LLC, JUDGMENT [36] 15 Defendant. [16] 17 I. INTRODUCTION 18 Plaintiff Sazerac Brands, LLC moves for entry of default judgment against 19 Defendant Allocated Liquor LLC on Sazerac’s Complaint for trademark infringement, 20 counterfeiting, false designation of origin, and unfair competition. (Mot. Default J. 21 (“Motion” or “Mot.”), ECF No. 36.) For the reasons that follow, the Court GRANTS 22 Sazerac’s Motion.1 23 II. BACKGROUND 24 Sazerac markets and sells alcoholic beverages and distilled spirits, including its 25 award-winning Weller bourbons. (Compl. ¶¶ 12–13, 20, ECF No. 1.) Sazerac sells its 26 Weller-branded bourbons under the W.L. WELLER trademarks, which have been in [27] 28 1 Having carefully considered the papers filed in connection with the Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. 1 use continuously for over four decades. (Id. ¶¶ 15, 23.) Sazerac has invested 2 substantial resources in the advertising, marketing, and promotion of its 3 Weller-branded bourbons and owns numerous U.S. trademark registrations for the 4 Weller marks. (Id. ¶¶ 16, 23.) 5 Allocated is a liquor distribution company that re-sells various brands of 6 alcohol online. (Id. ¶ 26.) Although Allocated is not authorized to sell Weller-branded 7 bourbon, Allocated advertised and sold Weller-branded bourbon online, including in 8 the form of miniature bottle “gift sets.” (Id. ¶ 30.) Sazerac has never produced or 9 sold miniature bottles of Weller-branded bourbon. (Id.) 10 Upon learning of Allocated’s unauthorized advertising and sale of 11 Weller-branded bourbon, Sazerac’s counsel sent Allocated a letter demanding that 12 Allocated cease and desist from selling Weller-branded bourbons and disclose the 13 source of the counterfeit Weller products. (Id. ¶ 34, Ex. B (“Cease-and-Desist 14 Letter”), ECF No. 1-2.) Allocated’s owner responded that it had purchased the 15 bourbons from a seller on Etsy. (Id. ¶ 35.) Allocated removed all Weller products 16 from its website and stopped selling Weller or other Sazerac products. (Decl. Cynthia 17 J. Walden ISO Mot. (“Walden Decl.”) ¶¶ 6, 9, ECF No. 36-2.) Allocated’s counsel 18 confirmed that Allocated had purchased “around 10 sets” of miniature Weller bottles 19 from an Etsy seller “‘about a year ago’ and ‘had three set[s] le[f]t in the inventory,’ 20 which had been ‘discarded.’” (Id. ¶ 9.) Sazerac requested additional information, but 21 Allocated did not provide it. (Compl. ¶ 35.) 22 On November 18, 2022, Sazerac filed this action against Allocated asserting 23 federal and state law claims for trademark infringement, counterfeiting, false 24 designation of origin, and unfair competition. (Id. ¶¶ 37–80.) In January 2023, 25 Allocated’s counsel notified Sazerac that she had been retained only to assist with the 26 Cease-and-Desist Letter and did not represent Allocated in litigation. (Walden Decl. 27 ¶ 18.) After Sazerac served Allocated with the Complaint, and Allocated failed to [28] 1 timely respond, the Clerk entered Allocated’s default. (Proof of Service, ECF No. 18; 2 Entry of Default, ECF No. 31.) Sazerac then filed this Motion for Default Judgment. 3 III. LEGAL STANDARD 4 Federal Rule of Civil Procedure (“Rule”) 55(b) authorizes a district court to 5 grant a default judgment after the Clerk enters default under Rule 55(a). However, 6 before a court can enter a default judgment against a defendant, the plaintiff must 7 satisfy the procedural requirements in Rules 54(c) and 55, and Central District Civil 8 Local Rules 55-1 and 55-2. Even when these procedural requirements are satisfied, 9 “[a] defendant’s default does not automatically entitle the plaintiff to a court-ordered 10 judgment.” PepsiCo, Inc., v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1174 (C.D. Cal. 11 2002). Instead, “[t]he district court’s decision whether to enter a default judgment is a 12 discretionary one.” Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). 13 Generally, after the Clerk enters a default, the defendant’s liability is 14 conclusively established, and the well-pleaded factual allegations in the plaintiff’s 15 complaint “will be taken as true” except those pertaining to the amount of damages. 16 TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915 , 917–18 (9th Cir. 1987) (per curiam) 17 (quoting Geddes v. United Fin. Grp., 559 F.2d 557 , 560 (9th Cir. 1977)). A court 18 need not make detailed findings of fact in the event of default, except as to damages. 19 See Adriana Int’l Corp. v. Thoeren, 913 F.2d 1406, 1414 (9th Cir. 1990). 20 IV. DISCUSSION 21 Sazerac satisfies the procedural requirements for default judgment and 22 establishes that entry of default judgment against Allocated is substantively 23 appropriate. However, only some of Sazerac’s requested relief is warranted. 24 A. Procedural Requirements 25 Local Rule 55-1 requires that the movant establish: (1) when and against what 26 party default was entered; (2) the pleading upon which default was entered; 27 (3) whether the defaulting party is a minor or incompetent person; (4) that the 28 Servicemembers Civil Relief Act does not apply; and (5) that the defaulting party was 1 properly served with notice, if required under Rule 55(b)(2). In turn, Rule 55(b)(2) 2 requires written notice on the defaulting party if that party “has appeared personally or 3 by a representative.” 4 Sazerac satisfies these requirements. On December 20, 2022, the Clerk entered 5 default against Allocated as to Sazerac’s Complaint. (Entry of Default.) Allocated is a 6 limited liability company, not an infant or incompetent person, and the 7 Servicemembers Civil Relief Act does not apply. (Walden Decl. ¶¶ 20–21.) Finally, 8 Allocated has not appeared in this case, so written notice of the Motion was not 9 required. Nevertheless, Sazerac served notice of this Motion on Allocated’s registered 10 agent. (Proof of Service Mot., ECF No. 39.) Thus, Sazerac meets the procedural 11 requirements for default judgment. 12 B. Eitel Factors 13 In evaluating whether entry of default judgment is warranted, courts consider 14 the “Eitel factors”: (1) possibility of prejudice to plaintiff; (2) merits of plaintiff’s 15 substantive claim; (3) sufficiency of the complaint; (4) sum of money at stake; 16 (5) possibility of a material factual dispute; (6) whether the default was due to 17 excusable neglect, and (7) the strong policy favoring decisions on the merits. See 18 Eitel v. McCool, 782 F.2d 1470 , 1471–72 (9th Cir. 1986). “Of all the Eitel factors, 19 courts often consider the second and third factors to be the most important.” Vietnam 20 Reform Party v. Viet Tan-Vietnam Reform Party, 416 F. Supp. 3d 948 , 962 (N.D. Cal. 21 2019) (internal quotation marks omitted). Accordingly, the Court considers these two 22 factors first. 23 1. Second & Third Eitel Factors 24 The second and third Eitel factors require a plaintiff to “state a claim on which 25 the [plaintiff] may recover.” PepsiCo, 238 F. Supp. 2d at 1175 (alteration in original). 26 Although well-pleaded allegations are taken as true, “claims which are legally 27 insufficient[] are not established by default.” Cripps v. Life Ins. Co. of N. Am., [28] 980 F.2d 1261, 1267 (9th Cir. 1992). 1 Sazerac raises claims under federal and California law for trademark 2 infringement, counterfeiting, false designation of origin, and unfair competition. 3 These claims are all subject to the “same legal standards.” Rearden LLC v. Rearden 4 Com., Inc., 683 F.3d 1190, 1221 (9th Cir. 2012) (federal and California trademark 5 infringement); Brookfield Commc’n Inc. v. W. Coast Ent. Corp., 174 F.3d 1036 , 6 1046 n.8 (9th Cir. 1999) (federal trademark infringement and unfair competition); 7 Cleary v. News Corp., 30 F.3d 1255 , 1262–63 (9th Cir. 1994) (California unfair 8 competition and federal trademark claims including false designation of origin); 9 Phillip Morris USA Inc. v. Shalabi, 352 F. Supp. 2d 1067, 1072 (C.D. Cal. 2004) 10 (same); Alixir Co. v. Qué Onda Beverage, Inc., No. 2:20-cv-08368-RGK (RAOx), [11] 2021 WL 971057 , at *6 (C.D. Cal. Jan. 6, 2021) (same) (citing Cleary, 30 F.3d 12 at 1262–63)). The Court therefore analyzes Sazerac’s claims together for the purposes 13 of this Motion as a federal trademark infringement claim under the Lanham Act. 14 To state a claim for trademark infringement under the Lanham Act, a plaintiff 15 must allege “(1) that it has a protectible ownership interest in the mark,” Dep’t of 16 Parks & Recreation v. Bazaar Del Mundo Inc., 448 F.3d 1118, 1124 (9th Cir. 2006), 17 and (2) that the defendant “subsequently and without authorization used” the mark or 18 “a similar mark likely to cause consumer confusion, deception[,] or mistake,” Shalabi, [19] 352 F. Supp. 2d at 1072 . 20 Protectible Ownership Interest: A plaintiff may establish a protectible 21 ownership interest in a mark through registration, which constitutes prima facie 22 evidence of the validity of the mark, the registrant’s ownership of the mark, and the 23 right to the mark’s exclusive use. 15 U.S.C. § 1115 (a). 24 Sazerac alleges that it has a protectable ownership interest in its Weller marks 25 and submits registration numbers and trademark records in support. (See Compl. ¶ 23, 26 Ex. A, ECF No. 1-1; Mot. 7–9.) Accordingly, Sazerac sufficiently establishes that it 27 has a protectible ownership interest in the Weller marks. [28] 1 Likelihood of Confusion: The likelihood of consumer confusion is a factual 2 determination, normally assessed through multiple factors. Shalabi, 352 F. Supp. 2d 3 at 1073 (citing Accuride Int’l Inc. v. Accuride Corp., 871 F.2d 1531, 1534 (9th Cir. 4 1989)). However, “in cases involving counterfeit marks,” the multi-factor assessment 5 is “unnecessary . . . because counterfeit marks are inherently confusing.” Id. A mark 6 is considered “counterfeit” if it is “identical with, or substantially indistinguishable 7 from” the plaintiff’s trademark, regardless of whether the defendant knew of the 8 plaintiff’s registration. 15 U.S.C. §§ 1116 (d)(1)(B), 1127. 9 Sazerac alleges that Allocated is selling Weller-branded bourbon products 10 bearing marks identical to the Weller registered trademarks. (Compl. ¶¶ 29–31.) 11 Sazerac submits screenshots of Allocated’s now-defunct website offering “Sample gift 12 box set[s]” of miniature Weller-branded bourbons, products which Sazerac does not 13 produce. (Id. ¶ 30.) Sazerac further alleges that the miniature bourbons Allocated 14 offered for sale are “nearly identical imitations of genuine WELLER branded products 15 sold by Sazerac,” bearing “exact copies of the WELLER Marks.” (Id. ¶ 31.) 16 Sazerac’s allegations that Allocated sold “nearly identical” miniature bourbons 17 bearing “exact copies” of the Weller marks sufficiently establish that the identified 18 products are counterfeit, and therefore inherently confusing. See Shalabi, 352 F. 19 Supp. 2d at 1073. Moreover, Sazerac submits evidence that its customers were 20 actually confused by Allocated’s counterfeits, as a customer contacted Sazerac seeking 21 to purchase “additional WELLER miniature bottles.” (Mot. 12 (citing Walden Decl. 22 ¶ 2).) 23 Accepting Sazerac’s allegations as true, TeleVideo Sys., 826 F.2d at 917–18, 24 Sazerac sufficiently states claims on which it may recover for trademark infringement, 25 counterfeiting, false designation of origin, and unfair competition. Therefore, the 26 second and third Eitel factors weigh in favor of entering default judgment against 27 Allocated. [28] 1 2. Remaining Eitel Factors 2 On balance, the remaining Eitel factors also weigh in favor of entering default 3 judgment against Allocated. To begin, the first and fourth Eitel factors—possibility of 4 prejudice and sum of money at stake—favor default judgment. Sazerac would suffer 5 prejudice absent entry of default judgment because it would be “without other 6 recourse for recovery.” PepsiCo, 238 F. Supp. 2d at 1177 . Further, as discussed 7 below in the damages analysis, the sum of money Sazerac seeks is expressly 8 authorized by statute. 9 The fifth and sixth factors—possibility of dispute and excusable neglect—also 10 favor default judgment. Sazerac’s allegations are accepted as true on default, and 11 Allocated “has made no attempt to challenge the accuracy of the allegations in the 12 complaint.” Landstar Ranger, Inc. v. Parth Enters., Inc., 725 F. Supp. 2d 916, 920 , 13 922 (C.D. Cal. 2010). Sazerac supports its claims with evidence, and the Court’s 14 review of the record reveals “no factual disputes . . . that preclude the entry of default 15 judgment.” Id. Moreover, although Allocated initially retained counsel to respond to 16 Sazerac, it ultimately elected not to continue with legal representation or otherwise 17 appear and defend in this litigation after Sazerac filed its Complaint. (Walden Decl. 18 ¶ 18; Entry of Default.) Accordingly, nothing in the record suggests that Allocated’s 19 failure to appear is the result of excusable neglect. 20 Finally, the seventh factor—policy favoring decisions on the merits—always 21 weighs in a defaulting defendant’s favor. However, because Allocated’s failure to 22 appear in this action prevents the Court from reaching a decision on the merits, this 23 factor does not prevent the Court from entering judgment by default. See Duralar 24 Techs. LLC v. Plasma Coating Techs., Inc., 848 F. App’x 252 , 255 (9th Cir. 2021) 25 (affirming entry of default judgment where all factors except the seventh weighed in 26 the plaintiff’s favor). [28] 1 In sum, the Eitel factors weigh in favor of entering default judgment against 2 Allocated on Sazerac’s claims under federal and California law for trademark 3 infringement, counterfeiting, false designation of origin, and unfair competition. 4 C. Requested Relief 5 “A default judgment must not differ in kind from, or exceed in amount, what is 6 demanded in the pleadings.” Fed. R. Civ. P. 54(c). Sazerac seeks a permanent 7 injunction, statutory damages, and attorneys’ fees. (Mot. 16–24.) The relief Sazerac 8 seeks does not differ in kind from the relief requested in the Complaint. (See Compl. 9 ¶¶ A–O.) However, for the following reasons, the Court awards Sazerac some, but not 10 all, of the requested relief. 11 1. Permanent Injunction 12 Sazerac requests that the Court permanently enjoin Allocated’s infringement 13 and counterfeiting. (Mot. 16–20.) 14 “The Lanham Act gives the court ‘power to grant injunctions according to the 15 rules of equity and upon such terms as the court may deem reasonable, to prevent the 16 violation’ of a mark holder’s rights.” PepsiCo, 238 F. Supp. 2d at 1177 (quoting [17] 15 U.S.C. § 1116 (a)). A plaintiff seeking a permanent injunction must demonstrate 18 that (1) it has suffered an irreparable injury, (2) for which a legal remedy is 19 inadequate, (3) the balance of hardships between the plaintiff and defendant supports 20 an equitable remedy, and (4) the “public interest would not be disserved by a 21 permanent injunction.” Reno Air Racing Ass’n v. McCord, 452 F.3d 1126 , 1137 n.11 22 (9th Cir. 2006) (quoting eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 , 391 23 (2006)). “The decision to grant or deny permanent injunctive relief is an act of 24 equitable discretion by the district court . . . .” eBay, 547 U.S. at 391 . 25 Sazerac seeks to enjoin Allocated from using the Weller marks and argues a 26 legal remedy is inadequate here because Allocated “will likely continue to willfully 27 infringe” the marks. (Mot. 18.) However, Sazerac submits evidence establishing that, 28 after receiving Sazerac’s Cease-and-Desist Letter, Allocated removed the infringing 1 and counterfeit products from its website. (Walden Decl. ¶ 6.) Allocated also 2 confirmed through counsel that it “was no longer selling WELLER or other Sazerac 3 products” and that any remaining inventory had been “discarded” or would “be 4 promptly destroyed.” (Id. ¶ 9.) Based on Allocated’s response to Sazerac’s 5 Cease-and-Desist Letter, Sazerac has not established that Allocated is likely to 6 “continue to willfully infringe.” (Mot. 18.) As such, the Court finds that a permanent 7 injunction is not supported by the facts in this case. 8 2. Statutory Damages 9 Sazerac seeks statutory damages of between $20,000 and $100,000 per 10 counterfeit mark, for a total between $40,000 and $200,000, to compensate Sazerac’s 11 lost profits, punish Allocated’s willful infringing conduct, and deter future infringing 12 activity. (Mot. 16, 20–23.) 13 A plaintiff prevailing on a trademark infringement claim is generally entitled to 14 recover the defendant’s profits, actual damages, and the costs of the action. 15 U.S.C. 15 § 1117(a). However, when a defendant has used a counterfeit mark, a plaintiff may 16 elect to request statutory damages instead of actual damages. Id. § 1117(c). 17 Section 1117(c) authorizes statutory damages between $1,000 and $200,000 per 18 counterfeit mark per type of good. Id. § 1117(c)(1). Where the use of the counterfeit 19 mark was willful, § 1117(c) authorizes “not more than $2,000,000 per counterfeit 20 mark per type of good[].” Id. § 1117(c)(2). “In determining the amount of damages 21 for infringement, courts have generally considered whether the amount of damages 22 requested bears a ‘plausible relationship’ to a plaintiff’s actual damages.” Nestlé USA, 23 Inc. v. Gunther Grant, Inc., No. 2:13-cv-6754-MMM (ASx), 2014 WL 12558008 , 24 at *14 (C.D. Cal. May 13, 2014) (quoting Adobe Sys., Inc. v. Tilley, No. C 09-1085 25 PJH, 2010 WL 309249 , at *5–6 (N.D. Cal. Jan. 19, 2010)). 26 As Allocated failed to appear and defend in this action, Sazerac’s actual 27 damages are unknown. In pre-litigation correspondence, Allocated admitted to 28 offering for sale at least ten counterfeit Weller-branded bourbon gift sets for $299.99 1 each, and to selling at least seven of the sets. (See Walden Decl. ¶ 9; Compl. ¶ 4.) 2 Thus, Allocated gained at least $2,099.93 through counterfeit sales. Although 3 Allocated’s expenses are unknown and thus cannot be subtracted to calculate 4 Allocated’s actual profits, this figure still provides a reference point for Allocated’s 5 potential counterfeit profits. This is a consideration in determining a reasonable 6 statutory award. Nestlé, 2014 WL 12558008 , at *14. 7 Sazerac elects to recover statutory damages pursuant to § 1117(c), instead of 8 actual damages or Allocated’s profits. (Mot. 21–23.) Sazerac emphasizes the need to 9 deter and punish Allocated’s willful and deliberate misconduct with damages. (Id.) 10 Allocated purchased the counterfeit bourbon gift sets from a seller on Etsy, but Etsy is 11 not a lawful distributor of alcoholic beverages and prohibits the sale of alcohol on its 12 site. (See Mot. 10 (citing Etsy Prohibited Items Policy, https://www.etsy.com/ legal/ 13 prohibited/ ?ref=list#Q1).) As such, Allocated knew its prohibited purchase of 14 alcohol from Etsy could not be from an authorized seller of Weller-branded bourbons. 15 Moreover, Allocated sold its offering of Weller-branded bourbons at a premium price, 16 (id. at 21), suggesting that Allocated knew the value of the Weller brand and 17 intentionally offered the counterfeit products to obtain a comparable premium profit. 18 These actions support imposing statutory damages to punish and deter Allocated from 19 future infringement. 20 On the other hand, Allocated promptly responded to Sazerac’s Cease-and21 Desist Letter by removing the infringing and counterfeit products from its website and 22 discarding or destroying any remaining inventory. Additionally, Allocated confirmed 23 that it was no longer selling Weller or Sazerac products. Although Allocated did not 24 provide Sazerac all of the information Sazerac requested concerning the source of the 25 counterfeit products, Allocated’s prompt corrective action indicates it took Sazerac’s 26 Cease-and-Desist Letter seriously. The damages awarded should therefore also 27 account for Allocated’s prompt corrective action. [28] 1 Balancing the relevant considerations, and in light of decisions of other courts 2 in this district addressing similar issues, the Court concludes that $15,000 per 3 counterfeit mark, for a total of $30,000 in statutory damages, is appropriate. See 4 Nestlé, 2014 WL 12558008 , at *16 (awarding $20,000 per infringed mark where 5 defendants used the internet to reach a wider consumer base and caused market 6 confusion, but plaintiff offered no accounting of defendant’s profits); Coach, Inc. v. 7 Am. Fashion Gift, No. 2:12-cv-07647-MWF (RZx), 2013 WL 950938 , at *2 8 (C.D. Cal. Mar. 12, 2013) (awarding a total of $10,000 in statutory damages where 9 plaintiff’s trademarks were highly valuable, with the type of purse at issue selling for 10 around $250, but the record was unclear on the extent of defendants’ infringing 11 activity). 12 3. Attorneys’ Fees 13 Finally, Sazerac seeks attorneys’ fees pursuant to 15 U.S.C. § 1117 (a) and Local 14 Rule 55-3. (Mot. 23–24.) 15 “[T]he Lanham Act allows an award of attorneys’ fees in ‘exceptional cases.’” 16 Nutrition Distrib. LLC v. IronMag Labs, LLC, 978 F.3d 1068, 1081 (9th Cir. 2020) 17 (quoting 15 U.S.C. § 1117 (a)). Such an award of attorneys’ fees is permitted but not 18 mandated. Id. Whether a case is “exceptional” is determined in light of the totality of 19 circumstances, considering several nonexclusive factors and using a preponderance of 20 the evidence standard. SunEarth, Inc. v. Sun Earth Solar Power Co., 839 F.3d 1179 , 21 1180–81 (9th Cir. 2016) (discussing Octane Fitness, LLC v. ICON Health & Fitness, 22 Inc., 572 U.S. 545, 554 (2014), and the “parallel and identical” “exceptional” standard 23 in the Patent Act). “[A]n ‘exceptional’ case is simply one that stands out from others 24 with respect to the substantive strength of a party’s litigating position . . . or the 25 unreasonable manner in which the case was litigated.” Id. at 1180. 26 Sazerac does not establish that this case is exceptional so as to warrant an award 27 of attorneys’ fees. On October 7, 2022, after receiving Sazerac’s Cease-and-Desist 28 Letter, Allocated removed the counterfeit and infringing products from its website and 1 | discarded or destroyed the infringing inventory. (Walden Decl. §§6, 9.) On 2 || October 19, 2022, Allocated’s then-counsel confirmed that Allocated was no longer 3 || selling Weller or other Sazerac products. (/d. 4] 9.) Sazerac does not demonstrate that 4|| these representations were false or erroneous, yet on November 18, 2022, Sazerac 5 || initiated this litigation on the grounds that Allocated continued to infringe. (See 6 || generally Compl.) Moreover, other than Allocated’s failure to appear and defend, 7 || litigation in this case has been straightforward, with substantive filings limited to the 8 | initial Complaint and the instant Motion. Accordingly, Sazerac fails to establish that 9 || this case is exceptional, and an award of attorneys’ fees is therefore not appropriate. 10 Vv. CONCLUSION 11 For the reasons discussed above, the Court GRANTS Sazerac’s Motion for 12] Entry of Default Judgment against Allocated for trademark infringement, 13 || counterfeiting, false designation of origin, and unfair competition. (ECF No. 36.) The 14 || Court AWARDS Sazerac $30,000 total in statutory damages. The Court DENIES 15 || Sazerac’s request for a permanent injunction and attorneys’ fees. The Court will issue 16 || Judgment consistent with this order. [17] 18 IT IS SO ORDERED. [19] 20 July 3, 2023 21 FF “gd 3 OTIS D. HT, II 4 UNITED STATES DISTRICT JUDGE